In Defense of Henry George's Remedy:
The Public Appropriation of
Rent
Edward J. Dodson
[A response to comments posted by Jack O'Donnell
at the Land-Theory
discussion list, May, 2006]
I have been going thru material accumulated over many years of
conferences and came across your paper "Confessions of a
Socialist-Libertarian." I was happy to find a copy of a revised
version available on-line to review. As someone who has been teaching
Henry George's political economy for twenty-five years now, I was
interested to read why you dismiss George's remedy. I have a few
thoughts to convey that will hopefully give you some reason to
reconsider your conclusion.
You write:
"I do not agree with Henry George's remedy
to cure the ills of society, but his assessment of the cause of these
ills is beyond agreement. It simply is. The cause of poverty and the
restraints on progress is the ability to monopolize the use of land."
George would argue that monopolization of land is the result of the
private appropriation of rent. Every parcel of land has some potential
rental value (from zero on up). Public collection of this rental value
removes the ability to profit from the static activity of ownership.
As time goes on, fewer and fewer individuals or entities will hold
onto locations they are not using to generate sufficient cash flow to
cover the payment of location rent to society, plus obtain a desired
return to labor and capital goods.
You write:
"The errors of his proposed remedy are
that firstly he proposed to tax only the economic rent of land as that
term is conventionally used. But his arguments were developed using a
version of the economist's theory of production, especially their
definition of land. Secondly he proposed to tax land at 100% of its
monopoly rent. But monopoly is necessary for exchange value. And,
exchange value is the essence of production."
Henry George's laws of production and distribution are best
described, I believe, as laws of tendency. His treatment of rent is
much more rigorous and expansive than his contemporaries or
forerunners. For one thing, George understood that the highest land
values occur in the centers of population, finance and commerce. Rent
arises naturally. Monopoly conditions are not necessary for this to
occur. Monopoly of locations creates an artificial scarcity that
permits those who control land to claim a portion of wealth being
produced well above the natural level of rent. By public collection of
rent, monopoly rents would eventually disappear. I am at a loss to
understand how you come to the conclusion that "monopoly is
necessary for exchange value." Exchange value accrues to a good
or service because of reciprocal demand, because of the advantages of
specialization and of voluntary association.
You write:
"It is true that to eliminate restraints
to progress we must eliminate the ability of monopolists to exploit
labor by denying it the resources of nature that are necessary to
create wealth. Monopoly is also necessary to create wealth. Without
monopoly there is no wealth."
What is required to produce wealth from land is security of
possession. Possession is a privilege, in return for which the
possessor is - or ought to be - obligated to compensate all other
members of society for the privilege enjoyed. What Henry George taught
us is that the appropriate level of compensation is the
market-determined location rent for the control granted over the
location. Market forces would result in higher rents when there are
few, if any, restrictions on the permissible uses of a location; and,
lower market rents when restrictions are significant (e.g.,
environmental protections, height restrictions, zoning, building
codes, etc.). Security of possession extends "exclusive access"
to the deedholder (or lessee, if under a leasehold); however,
referring to this as "monopoly" clouds understanding.
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